I checked the code and actually it behaves as per design.
There are 8 hard-coded color schemes in the drop-down list and the 9th option is "from TERATERM.INI file". Every time user changes any of the color settings, LogMeTT compares them with each of the schemes in the drop-down list starting from the top. Then the 1st matching schema (if any) is automatically selected.
You most likely saved configuration into TERATERM.INI when current colors were set as in"Green on Black" schema. That's why when you try to switch to "from TERATERM.INI file", LogMeTT reads INI file settings, then discovers that they match "Green on Black" and reverts drop down list selection to "Green on Black".
One of my computers does the same with "Grey on Black" schema, while 2 other switch to "from TERATERM.INI file" item and keep showing it.
If you still want to change to INI file colors - just make sure colors in INI file do not match any of 8 color schemes hard-coded in LogMeTT and then the drop-down list will work as you expect.